Russian energy shift encourages Swiss firms

Will Moscow provide rich pickings for Swiss firms? Keystone

Swiss firms could profit from Russia’s drive to upgrade its energy infrastructure and diversify into clean-tech alternatives, a business conference has heard.

Russia has embarked on a push to upgrade its electricity grid and its oil- and gas-dependent energy infrastructure. The 2014 Winter Olympics project and the creation of a Silicon Valley near Moscow could also offer lucrative contracts.

Trade between Russia and Switzerland has nearly tripled in the past five years, reaching SFr2.8 billion ($2.9 billion) in 2009. The two countries signed a new three-year trade deal in August to boost economic links.

Business Network Switzerland (Osec), the government organisation that promotes Swiss exports, brought together Swiss and Russian business leaders in Zurich on Thursday.

Uwe Krüger, president of Osec’s Cleantech Switzerland export platform, believes Switzerland’s cutting-edge technology in the field of alternative energies, particularly photovoltaics, will be in high demand.

“There is an enormous drive currently to invest more in clean technology, specifically in the high-tech segment. Swiss companies – big and small – can make a significant contribution in a wide range of technologies,” he told swissinfo.ch.

Energy demands

Demand for electricity in Russia is expected to grow by 30 per cent in the next decade, according to Russian energy consultancy group Abercade. To help meet this need, and to lower emissions, Russia plans to increase the share of alternative energies from one per cent to 4.5 per cent by 2030.

Large Swiss companies, such as energy infrastructure specialist ABB, have been actively present in Russia for some time. But Osec also wants more small and medium-sized enterprises (SMEs) to enter the market.

Such companies would benefit from collaborations with Russian counterparts to negotiate a path through Russia’s bureaucratic hurdles, Krüger believed.

Photovoltaic specialist Oerlikon has made rapid strides in the Russian market since it was taken over by Renova, the giant Russian group owned by billionaire Viktor Vekselberg. But other firms could benefit from other kinds of collaboration.

“Any kind of joint venture structure that is mutually beneficial for both partners helps a lot to overcome typical hurdles – such as language and bureaucracy – when trying to do business in Russia,” Krüger said.

Political hurdle

Perhaps a greater obstacle to smaller Swiss firms entering the Russian market is a political system that often engenders mistrust in Western Europe. The sacking of Moscow mayor Yuri Luzhkov by Russian President Dmitri Medvedev last month would hardly have dampened such suspicions.

But Krüger is adamant that Russia is still a stable place to do business. “As an entrepreneur, you can adapt to any framework as long as it is predictable and stable,” he said.

“If you compare stability in Russia with a lot of countries, there might be some things that could be criticised within the country, but when it comes to reliability of framework conditions there is a very good environment.”

Switzerland is already very much involved in an ambitious project to create a new Silicon Valley in Skolkovo, near Moscow. The project, expected to cost $5.5 billion (SFr5.31 billion) over the next five years aims to build a research and educational campus for 14,000 students, researchers and other staff.

Learning from the Swiss

The venture is also attracting international companies and educational institutions with a view to developing cutting-edge research programmes, postgraduate courses and nurturing promising start-ups to help them launch into the private sector.

The Skolkovo Foundation overseeing the project is co-chaired by Vekselberg and has already signed up prestigious names such as MIT, Boeing, Cisco and Siemens as partners.

The Swiss Federal Institute of Technology is also being pursued while Zurich’s Technopark, which fosters Swiss start-ups, has signed a memorandum of understanding to participate in the venture.

“Technopark is unique and an international success story,” Ulrich Kunz, a Swiss consultant who advises Vekselberg on the Moscow project, told swissinfo.ch.

“We are interested in their success stories and history. We want to utilise their process of incubating start-ups and transfer it to our environment.”

Swiss-Russian relations

Regular contacts between Russia and Switzerland go back to the 18th century. In the 19th century Russia was one of the great powers which guaranteed Swiss neutrality.

In the 19th and early 20th century Switzerland attracted Russian artists, students and dissidents, including Lenin, who spent several years of his European exile in different Swiss cities.

Following the Russian revolution of 1917, Switzerland broke off diplomatic relations the next year, and they were only restored in 1946.

In the 1990s after the end of the Cold War, relations were quickly stepped up, not only on the political and economic level, but also in science and culture.

Switzerland has been providing technical and financial support and humanitarian aid to Russia for ten years, particularly in the northern Caucasus.

Between the late 1990s and 2007 a number of issues caused strains in relations including the 2002 Überlingen air crash in Swiss-controlled airspace which killed 71 people, mostly Russian children.

The refusal of the Swiss authorities to grant judicial assistance for legal actions linked to the Yukos affair and the arrest of Russian ex-nuclear energy minister Yevgeny Adamov also strained the relationship.

In the wake of the Russia-Georgia war of 2008, Switzerland has represented Russia’s diplomatic interests in Georgia and Georgia’s interests in Russia.

Trade between Switzerland and Russia has been steadily growing in the past few years. After seeing continuous growth since 2002, trade dipped last year due to the ongoing effects of the global recession.

Swiss exports to Russia totalled SFr2.13 billion – down 33% on 2008 levels. Imports to Switzerland from Russia fell 31% to SFr725 million.